Point Taken: The UK Supreme Court Finally Confirms the General Law of Liquidated Damages (LDs)
April 04, 2022 —
Vincent C. Zabielski & Julia Kalinina Belcher - Gravel2Gavel Construction & Real Estate Law BlogIn a long-awaited decision which overturned the Court of Appeal’s ruling in the Triple Point Technology vs PTT Public Company case, the UK Supreme Court confirmed the general law of LDs, which is that—absent clear words to the contrary—they accrue up to the date of termination of a contract regardless of whether the contractor completes the work; after that, general damages are recoverable. This approach was held to reflect “commercial reality and the accepted function of liquidated damages.” Although the contract in question was not a construction contract, the decision is equally relevant in the construction sphere.
By way of reminder, Triple Point failed to complete the works under Phase 1 of a contract for the design, installation, maintenance and licencing of software. Despite agreeing a revised project plan, PTT gave notice to terminate.
Reprinted courtesy of
Vincent C. Zabielski, Pillsbury and
Julia Kalinina Belcher, Pillsbury
Mr. Zabielski may be contacted at vincent.zabielski@pillsburylaw.com
Ms. Belcher may be contacted at julia.belcher@pillsburylaw.com
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Coverage for Faulty Workmanship Found In South Dakota
October 11, 2017 —
Tred R. Eyerly - Insurance Law HawaiiThe South Dakota Supreme Court found coverage in favor of the general contractor who was sued for alleged faulty workmanship. Owners Ins. Co. v. Tibke Constr., Inc., 2017 S.D. LEXIS 106 (S.D. Aug. 23, 2017).
The homeowners hired Tibke Construction Inc. as general contractor to build a new house. Tibke hired Jerry's Excavating Inc. as a subcontractor to prepare the soil and perform excavation work. After the project was completed, the homeowners sued Tibke and Jerry's Excavating for negligent construction and breach of contract. The homeowners alleged that Jerry's Excavating failed to conduct soil-compaction testing before construction. They alleged that the home was built upon highly expansive soils, resulting in damage to the home by "excessive settlement, cracking, structural unsoundness and other damages." The complaint further alleged that damages existed only on portions of the home not worked on by Jerry's Excavating.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Construction Litigation Roundup: “A Less Than Valiant Effort”
June 21, 2024 —
Daniel Lund III - LexologyA Miller Act claimant in federal court in New Jersey in relation to a VA medical center project found itself on the wrong end of the law and was sent packing by the court.
The claimant had supplied products for the project to general contractor Valiant Group, LLC, pursuant to a purchase order from the GC. The general contractor allegedly refused to pay the supplier, leading to the claim against the GC and its payment bond surety in the amount of $126,900. The supplier also sought recovery under the federal Prompt Payment Act, 31 U.S.C. §§ 3901-07. State law claims were asserted as well.
Chipping away at the federal law claims – the claims forming the asserted basis for federal court jurisdiction for the case – the court first dispensed with the Prompt Payment Act claim. According to the court, allegations that the general contractor had “wrongfully and improperly withheld remuneration… despite [having] ‘received payment from the U.S. Department of Veterans Affairs’" – whether or not accurate – did not trigger the Act. The court wrote:
“The Prompt Payment Act was enacted ‘to provide the federal government with an incentive to pay government contractors on time by requiring agencies to pay penalties . . . on certain overdue bills . . . [and] was later amended to include provisions applicable to subcontractors.’… Absent from the Act, however, are ‘any explicit provisions for subcontractor enforcement if the prime contractor fails to make timely payment.’… This is because the Act ‘merely requires that the prime contractor's contract with the subcontractor include the specified payment clause. [It] does not require the prime contractor to actually make payments to the subcontractor[.]’… The Act, therefore, does not ‘give subcontractors an additional cause of action for an alleged breach by a general contractor of a subcontract.’”
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Daniel Lund III, PhelpsMr. Lund may be contacted at
daniel.lund@phelps.com
Contractor Liable for Soils Settlement in Construction Defect Suit
February 10, 2012 —
CDJ STAFFThe California Court of Appeals ruled on January 9 in Burrow v. JTL Dev. Corp., a construction defect case in which houses suffered damage due to improperly compacted soil, upholding the decision of the lower court.
Turf Construction entered into a deal with JTL to develop a parcel they acquired. A third firm, Griffin Homes, withdrew from the agreement “when a geotechnical and soils engineering firm reported significant problems with soil stability on 14 of the lots.” Turf Construction then took over compacting and grading the lots. Turf “had never compacted or graded a residential tract before.” Robert Taylor, the owner of Turf, “testified he knew there was a significant problem with unstable soils.”
After homes were built, the plaintiffs bought homes on the site. Shortly thereafter, the homes suffered damage from soil settlement “and the damage progressively worsened.” They separately filed complaints which the court consolidated.
During trial, the plaintiff’s expert said that there had been an inch and a half in both homes and three to five inches in the backyard and pool areas. “He also testified that there would be four to eight inches of future settlement in the next fifteen to twenty years.” The expert for Turf and JTL “testified that soil consolidation was complete and there would be no further settlement.”
Turf and JTL objected to projections made by the plaintiffs’ soil expert, William LaChappelle. Further, they called into question whether it was permissible for him to rely on work by a non-testifying expert, Mark Russell. The court upheld this noting that LaChappelle “said that they arrived at the opinion together, through a cycle of ‘back and forth’ and peer review, and that the opinion that the soil would settle four to eight inches in fifteen to twenty years was his own.”
Turf and JTL contended that the court relied on speculative damage. The appeals court disagreed, stating that the lower court based its award “on evidence of reasonably certain damage.”
Turf also that it was not strictly liable, since it did not own or sell the properties. The court wrote that they “disagree because Turf’s grading activities rendered it strictly liable as a manufacturer of the lots.” The court concluded that “Turf is strictly liable as a manufacturer of the lots.”
Judge Coffee upheld the decision of the lower court with Judges Yegan and Perren concurring.
Read the court’s decision…
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Judgment Proof: Reducing Litigation Exposure with Litigation Risk Insurance
March 04, 2024 —
Latosha M. Ellis & Charlotte Leszinske - Hunton Insurance Recovery BlogIt is not just your imagination: verdicts are getting bigger. So-called “nuclear verdicts” have increased in size and frequency over the past decade, particularly after the COVID-19 pandemic. Litigation risk insurance is a little known, but highly effective, option meant to compliment traditional insurance products and provide additional protection for policyholders nervous about litigation exposure.
Unfortunately, it is difficult to predict the exposure presented by any particular case. Between 2020 and 2022, the median
verdict increased 95%—from $21.5 million to $41.1 million. In
2022, a jury handed down a verdict worth $7.3 billion for injury to a single plaintiff. Even if an injury or loss is minor, juries have shown that they are willing to penalize corporate defendants with punitive damages that significantly exceed the award of compensatory damages. With such uncertainty and millions (if not billions) at stake, companies can reduce risk with litigation risk insurance.
Three key types of litigation risk insurance include: (1) punitive wrap insurance, (2) adverse judgment insurance, and (3) judgment preservation insurance.
Reprinted courtesy of
Latosha M. Ellis, Hunton Andrews Kurth and
Charlotte Leszinske, Hunton Andrews Kurth
Ms. Ellis may be contacted at lellis@HuntonAK.com
Ms. Leszinske may be contacted at cleszinske@HuntonAK.com
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"On Second Thought"
October 28, 2024 —
Daniel Lund III - LexologyRehearing requests are seldom granted by courts, and when they are, there’s usually something uniquely compelling in the request and the granting.
So is the case in a matter involving monies deposited in the registry of the federal court in New Orleans related to work performed on cleanup after Hurricanes Maria and Irma in the U.S. Virgin Islands. The party depositing monies – which represented subcontract sums paid to it by the general contractor – held back several hundred thousand dollars based on withholding provisions in the various contracts in play. The Court was tasked with evaluating not only a pay-when-paid provision in the subcontract of the claiming party, but also incorporation of the terms of a higher tiered contract which allowed for the withholding.
The Court initially granted summary judgment allowing the monies to be withheld. However, on request for rehearing, it was pointed up that while monies could be retained for purposes of covering attorney’s fees and costs related to litigation initiated by the plaintiff subcontractor’s vendors, there was a particular process for that withholding – and an assertion that the process was not followed.
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Daniel Lund III, PhelpsMr. Lund may be contacted at
daniel.lund@phelps.com
Bright-Line Changes: Prompt Payment Act Trends
September 16, 2024 —
Stephanie L. Cooksey - Peckar & Abramson, P.C.Untimely payment by the owner for contract work and additional work on construction projects can place an unfair financial burden on contractors and subcontractors. Most states have attempted to eliminate or mitigate this inequity in construction contracting through Prompt Payment Acts that govern payment deadlines and provide remedies for untimely payment. This article addresses the legislative trends aimed at minimizing the risk of non-payment, overdue payment, and withholding retainage in favor of downstream parties to a construction contract.
Fortifying Contractor Protections with “Bright-Line” Language
Over the last decade, states have been tightening prompt payment laws by replacing broad, general statutory language with bright-line rules. What is a bright-line rule? A specific or definite figure, a quantifiable marker—i.e., something owners, contractors, subcontractors, and suppliers should be aware of. Practically speaking, the more bright-line a prompt payment statute is, the greater the likelihood it will affect a construction project in your state.
A standard form construction contract, if not reviewed carefully, can create conflicts or confusion if it gives a party more leeway on payment deadlines than the applicable Prompt Payment Act. For example, consider an owner-issued Construction Change Directive (“CCD”) that requires a contractor to commence additional work immediately while a formal change order is negotiated. Consequently, a CCD can push financial burdens downstream, whether inadvertently or not, and may conflict with statutory payment deadlines. Nevertheless, an owner can be justified in its utilization of a CCD to maintain the project schedule. How should the parties competing interests be resolved?
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Peckar & Abramson, P.C.
Additional Elements a Plaintiff Must Plead and Prove to Enforce Restrictive Covenant
April 19, 2021 —
David Adelstein - Florida Construction Legal UpdatesFlorida Statute s. 542.335 is a statute that deals with restrictive covenants in contracts that impose a restraint on trade. It is an important statute to determine invalid restraints on trade that unreasonably or unfairly prevent competition. Any invalid restraint on trade is unenforceable. Restrictive covenants–or covenants in agreements that restrict you or prevent you from doing something–may unsuspectingly be included in contracts or the impact of the restrictive covenant may not be appreciated at the onset.
A party seeking to enforce a restrictive covenant in a contract has the additional burden of PROVING the validity and reasonableness of the restrictive covenant:
Under section 542.335, three requirements must be satisfied for a restrictive covenant to be enforceable: (1) the restrictive covenant must be “set forth in a writing signed by the person against whom enforcement is sought”; (2) the party seeking to enforce the restrictive covenant “shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant”; and (3) the party seeking to enforce the restrictive covenant “shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.”
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
